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If you don’t have rock-solid finances, now is not the time to buy a home – The Globe and Mail



Aspiring owners should think carefully before buying a home with the minimum down payment. So warns Canada’s most vocal housing official.

“A first-time home buyer purchasing a $300,000 home with a 5-per-cent down payment stands to lose over $45,000 on their $15,000 investment if prices fall just 10 per cent, which we are forecasting,” Evan Siddall, chief executive of the Canada Mortgage and Housing Corp. (CMHC), told a parliamentary committee earlier this week.

This fate could affect a large cohort if they’re forced to realize those losses. An estimated one in three first-time buyers and one in eight new mortgages have less than 10-per-cent equity. Most such folks are putting down just 5 per cent, which, after default-insurance fees, leaves them almost 100-per-cent financed.

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When you’re nearly 100-per-cent financed with no backup funds, you can’t move, refinance or sell without a loss.

You’re essentially trapped in your four walls.

That’s an eerie feeling, especially if prices are collapsing all around you.

It’s a depressing feeling if you have children and need a bigger home.

It’s a desperate feeling if you must move to accept an out-of-town job offer.

It’s a panic-inducing feeling if you lose income and can’t pay your mortgage at all.

Home buying with 1-per-cent equity has risk in normal times, let alone during what could be the most severe recession in modern history.

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Forget all those economists and their shot-in-the-dark forecasts. What does your gut tell you about where home values might be headed when we’re about to see:

  • An estimated 41.3-per-cent collapse in economic output this quarter, according to a Bloomberg survey of economists;
  • As many as one in five working-age adults either jobless or with major loss of income;
  • Up to one in five borrowers potentially unable to pay their mortgage after deferrals stop (the “deferral cliff,” as CMHC puts it);
  • Tens of thousands of businesses that will never again reopen;
  • Record mortgage delinquencies that could double the 1980s peak, per CMHC numbers.

Sure, the government is rolling out billions of dollars in various forms of short-term financial assistance, and sure, banks are deferring mortgage payments temporarily. But fast-forward to October when millions could still be off work while deferrals end. A year from now, CMHC fears tens of thousands of low-equity homeowners could owe more than their home is worth.

If you’re anxious to own a home, I don’t blame you. But if you’re not rock-solid financially, renting a bit longer is sensible risk management.

And remember, CMHC will garnishee your wages and pursue you up to the point of bankruptcy if you get an insured mortgage and don’t pay.

Should 5-per-cent down payments be banned?

Government policy makers are considering it and some fear they’ll hike the minimum down payment to 10 per cent.

That’s not going to happen near-term, not across-the-board, anyway. If it did, a price correction could become a price crash. The time to enact tough mortgage rules is before a crisis, not during a crisis.

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If credit tightening is measured – i.e., the feds don’t mandate 10-per-cent minimum down payments across the board – then higher down payments on select borrowers is arguably less negative than a potential flood of panic/forced sales from those borrowers.

Timing is key with so much at stake. Plummeting home prices would cost hundreds of thousands of jobs, a nose-dive in consumer spending, record lender losses, limits on refinancing, losses for seniors who rely on equity for survival and so on.

Were Ottawa to suddenly force 10-per-cent down industry-wide, the government could bear the blame for pushing housing off a cliff, and deep down it knows that.

Either way, it’s understandable to at least temporarily require bigger down payments – even 10 per cent – from less-qualified borrowers, those with weaker credit, higher debt ratios, less stable income and few backup financial resources.

If that sounds anything like you, don’t wait for the government to tell you that you can’t buy. Be a happy renter until at least later this year. Then re-evaluate.

Robert McLister is a founder of and intelliMortgage, and mortgage editor at You can follow him on Twitter at @RateSpy.

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World shares sink after inflation driven retreat on Wall St – Business News –



Shares declined in Europe and Asia on Thursday after a broad retreat on Wall Street triggered by worries over the impact of persistent high inflation on corporate profits and consumer spending.

U.S. futures were lower, while oil prices advanced.

Germany’s DAX lost 2% to 13,731.64 and the CAC 40 in Paris declined 1.9% to 6,234.78. Britain’s FTSE 100 shed 1.7% to 3,537.99. The future for the S&P 500 was 1% lower while the future for the Dow Jones Industrial Average sank 0.9%.

The Dow industrials sank more than 1,100 points, or 3.6% on Wednesday, and the S&P 500 had its biggest drop in nearly two years, shedding 4%. That was its steepest decline since June 2020. The tech-heavy Nasdaq fell 4.7%.

The benchmark index is now down more than 18% from the record high it reached at the beginning of the year. That’s just shy of the 20% decline that’s considered a bear market.

“The sentiment in the market is highly negative as traders and investors are largely concerned about an economic downturn and soaring inflation,” Naeem Aslam of Avatrade said in a commentary.

The Federal Reserve is trying to temper the impact from the highest inflation in four decades by raising interest rates. Many other central banks are on a similar track. But the Bank of Japan has stuck to its low interest rate policy and the gap between those benchmark rates of the world’s largest and third-largest economies has pushed the dollar’s value up against the Japanese yen.

Japan reported a trade deficit for April as its imports ballooned 28%. The shift reflects surging energy costs amid the war in Ukraine and a weakening of the yen against the U.S. dollar.

Japan’s exports grew to 8.076 trillion yen ($63 billion) last month, up 12.5% from the previous year, according to Ministry of Finance data released Thursday. Imports totaled 8.915 trillion yen ($70 billion) in April, up from 6.953 trillion yen in April 2021, and the highest since comparable numbers began to be taken in 1979.

The Nikkei 225 in Tokyo lost 1.9% to 26,402.84 and the Hang Seng in Hong Kong dropped 2.5% to 20,120.60. In South Korea, the Kospi shed 1.3% to 2,592.34, while Australia’s S&P/ASX 200 gave up 1.7% to 7,064.50.

The Shanghai Composite index reversed earlier losses, gaining 0.4% to 3.096.96.

On Wednesday, retailer Target lost a quarter of its value after reporting earnings that fell far short of analysts’ forecasts. Inflation, especially for shipping costs, dragged its operating margin for the first quarter to 5.3%. It had been expecting 8% or higher.

The company warned that its costs for freight this year would be $1 billion higher than it estimated just three months ago.

The report comes a day after Walmart said its profit took a hit from higher costs. The nation’s largest retailer fell 6.8%, adding to its losses from Tuesday.

Target and Walmart each provided anecdotal evidence that inflation is weighing on consumers, saying they held back on purchasing big-ticket items and changed from national brands to less expensive store brands.

The weak reports stoked concerns that stubbornly rising inflation is putting a tighter squeeze on a wide range of businesses and could cut deeper into their profits.

Other big retailers also have racked up hefty losses.

The data are not entirely consistent. On Tuesday, the market cheered an encouraging report from the Commerce Department that showed retail sales rose in April, driven by higher sales of cars, electronics, and more spending at restaurants.

Investors worry the Fed could trigger a recession if it raises interest rates too high or too quickly. Worries persist about global growth as Russia’s invasion of Ukraine puts even more pressure on prices for oil and food while lockdowns in China to stem COVID-19 cases worsens supply chain problems.

In other trading, benchmark U.S. crude oil rose 56 cents to $110.15 per barrel in electronic trading on the New York Mercantile Exchange. It dropped $2.81 to $109.59 on Wednesday.

Brent crude, the basis for pricing for international trading, climbed $1.19 to $110.30 per barrel.

The dollar fell to 128.14 Japanese yen from 128.20 yen late Wednesday. The euro strengthened to $1.0481 from $1.0464.

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Gold prices holding at session highs as U.S. existing home sales fall 2.4% in April – Kitco NEWS



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(Kitco News) – The gold market continues to trade near session highs, supported by more disappointing economic data. Rising interest rates continue to cool down the U.S. housing market as fewer consumers purchased home last month, according to the latest data from the National Association of Realtors (NAR).

Existing home sales fell to a seasonally adjusted and annualized rate of 5.61 million units last month, down 2.4% compared to March’s annualized rate of 5.75 million homes, the NAR said on Thursday. Market consensus projections called for existing home sales to fall only slightly to 5.65 million.

For the year, home sales are down 5.9%, the report said.

The gold market has seen some renewed technical buying momentum, which has been supported by weaker-than-expected economic data. June gold futures last traded at $1,842.40 an ounce, up nearly 1.5% on the day.

The U.S. housing sector has faced some challenging headwinds as the Federal Reserve looks to aggressively raise interest rates, which in turn is pushing mortgage rates higher.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”

Yun noted that the falling sales space is helping to boost the supply of existing homes. The report said that the inventory of homes for sale totaled 1,030,000 in April, representing a 2.2-month supply.

Although sales are down, Yun said that home prices still remain elevated.

“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” he said.

The report said the median existing-home price for all housing types in April was $391,200, up 14.8% from April 2021.

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Ford recalling 350,000 SUVs due to unexplained engine fires, including some sold in Canada – CBC News



Ford is asking the owners of 350,000 SUVs from the 2021 model year to take them to dealers for repairs because the engines can catch fire.

Ford says in U.S. government documents posted Thursday that it doesn’t know what’s causing fires in some Ford Expedition and Lincoln Navigator SUVs from the 2021 model year.

2863 of the vehicles were sold in Canada: 2,354 Expeditions, and 509 Navigators.

Owners are being advised to park them outside if possible because engine fires have been reported even when the vehicles were not in use.

Ford has reports of 16 fires under the hood, 12 of which started when the engine was off. One person was burned.

Trying to notify customers

So far it hasn’t developed a repair for the fires, which appear to start at the back of the engine compartment on the passenger side.

Ford says it’s treating the recall urgently and will use apps and mail to notify customers as soon as it develops a list of vehicle owners and addresses.

“We are working around the clock to determine the root cause of this issue and subsequent remedy so that customers can continue to enjoy using their vehicles,” Jeffrey Marentic, general manager of Ford passenger vehicles, said in a statement.

Ford began investigating fire reports on March 24. It says the fires appear to be limited to SUVs built from Dec. 1, 2020 to April 30, 2021. The company says it has no fire reports from vehicles built before or after those dates.

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